The monthly real estate reports from Arizona State University's Center for Real Estate Theory and Practice have suggested for several months that Millennials aren't buying homes in the Phoenix area.
This month's report includes more evidence this is true.
While demand for homes in the Phoenix area is low in general, the report highlights weak demand from first-time homebuyers: Sales of homes at $150,000 or less have fallen 42 percent in the last year (this most recent report uses data from March).
Meanwhile, sales of homes more than $1.5 million and even more than $3 million are at higher levels than they were before the recession.
With the low demand for the common man's home, ASU's real estate experts have been predicting that home prices may fluctuate a little over the year, but won't really increase.
Part of the explanation for this lies with the Millennials. From the report:
The underlying key problem for entry-level and mid-range housing demand is a lack of household formation. This has been dropping for a long time due to a number of factors including unemployment, falling birth rates, lower net migration and greater home sharing especially among millennials. If household creation were at the normal long term average we would quickly have a housing shortage here in Greater Phoenix.
Household creation usually starts with stronger demand for rentals, as adult children move out from their parents' homes. This is typically followed in the second stage by stronger demand for homes to buy. We are certainly starting to see demand for rentals pick up, though of course relatively few of these go through the ARMLS database. Vacancies are unusually low and supply is tight. Activity in multi-family (both new construction and re-sales) is strong. The bulk transactions going through recording in the last few months include a number of conversions and renovations of condos and town home communities to rental units under a single landlord owner.
The key issue for us is if and when overall demand for homes to buy will return to more normal levels for all property types.
The report says this low demand could "perk up" with 10 percent more Millennials buying homes.
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Still, the researchers say the evidence is pointing toward rent increases (which they've warned of before). There's an "unusually low" level of rentals, and not only were there fewer listings for rentals, but the time those homes are on the market has decreased from 50 days in February, to an average of 41 days in March.
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